House purchase loans slump 19%, reveals CML

Purchases dropped from 62,000 in December and 75,800 in January last year.

The figures also show that the value declined to £7.8bn – a 17% decline from £9.4bn in December and 31% lower than the £11.2bn value in January 2007.

LTVs were also down, with first-time-buyers’ average LTV totalling 88%, down from 90% in December and January 2007.

Meanwhile, home movers’ LTVs averaged 70%, down from 73% in December and 72% in January 2007.

The average first-time buyer borrowed 3.32 times their income, down from 3.38 in December and 3.31 in January last year. Home movers typically borrowed 2.97 times their income, down from 3.04 in December and 3.0 in January 2007.

But remortgaging activity increased by 43% to 85,000 remortgages, up from 59,000 in December.

The move away from fixed-rate products towards trackers has continued, which the CML attributes to consumer expectations of further base rate reductions this year.

Fixed-rate loans represented 57% of loans in January, down 20 percentage points from 77% in June and July 2007.

And 39% of first-time buyers avoided Stamp Duty in January, with just 11% caught in the higher bands. This compares with January 2006 when 53% of first-time buyers escaped the tax while only 6% were captured in higher brackets.

Michael Coogan, director general of the CML, says: “The wholesale funding markets remain largely closed and mortgage funding still remains constrained. This is now having a discernible impact on lending criteria and the ability of first-time buyers to get into the housing market.

“Tomorrow’s Budget presents a perfect opportunity for the government to do what it can to help first-time buyers by raising the stamp duty threshold.”

He adds: “While we don’t believe there is one silver bullet solution to problems in the wholesale funding markets, we welcome the Treasury’s recognition of the problem and willingness to work with the industry.

“But we are unconvinced that a new kitemark gold standard for mortgage securities is the solution, or that consumers will move to longer term fixed-rate mortgages without financial incentives. We await with interest the outcome of the Treasury’s Housing Finance Review due to be announced in the Budget.”

Recommended

Chancellor Alistair Darling has claimed the Treasury was right to guarantee savers’ deposits in Northern Rock last year.In today’s Budget speech, Darling also says the government was also correct in granting the lender of last resort facility from the Bank of England.He claims the move helped to restore confidence in the banking sector.

I read an entertaining article over the weekend, unfortunately cannot remember where, about the risks that landlords face when they do not keep a proper track of what is happening with their properties.The best story I heard was a landlord who had some student lets. At the end of the year he walked into one […]

Moneysupermarket.com has dismissed chancellor Alistair Darling’s focus on Open Market HomeBuy products in yesterday’s Budget as a huge disappointment. Louise Cuming, head of mortgages for the price comparison site, considers equity share mortgages as a good option in principle but adds that they benefit so few borrowers that they are useless in breathing life into […]

Base Commercial Mortgages is no longer accepting broker registrations.The lender says the decision has been made following a rapid increase in the number of new business enquiries being received, resulting from competitors withdrawing products and services from the commercial mortgage market. Base will continue to accept applications from brokers who are already registered but will […]